Commentary

Make it. Spend it. Then lose it all.

Commentary: That's Wall Street in 'The Zeroes'

By

JonFriedman

NEW YORK (MarketWatch) -- In his new book "The Zeroes," Randall Lane conveys the secret to understanding Wall Street's concept of money in the first decade of the 21st century: "See it. Make it. Spend it."

It was a period of excess and illusions. "Hedge fund and private equity guys were rock stars," said Lane, now 42, who founded Doubledown Media and treated these newly minted millionaires accordingly. Doubledown published such glossy magazines as Trader Monthly, Dealmaker and Private Air.

Doubledown assembled a database of rich people and, in Lane's immortal phrases, "celebrated" gluttony and fueled "the jealousy machine" on Wall Street. Above all, remember, these were wealthy folks who were obsessed with knowing how they were doing "relative to their peers."

Mostly, Doubledown will be remembered for its incredible parties. Held in palaces and attended by hundreds of flush financiers, they featured the best in beef and booze. Lane's appetite for holding parties knew no bounds. Even on Sept. 16, 2008, when the government took control of AIG Inc.
AIG, +0.41%
-- a day after Lehman Brothers collapsed -- Dealmaker magazine hosted a party for 1,000 stunned Wall Streeters.

A former Washington bureau chief for Forbes with an eye for accumulating his own fortune, Lane founded Doubledown, a company which eventually swelled to house about 60 employees. For a while, Lane, too, was riding high, launching magazines and holding celebrations that would have made sociologist and economist Thorstein Veblen -- a critic of conspicuous consumption -- throw up. Read Media Web column on Doubledown Media.

Ultimately, Wall Street had zero conscience, zero wisdom and zero money -- the profits were gone and so, for that matter, was Doubledown. Anybody who wants to understand Wall Street's insanity should read this book.

The stories are chilling, at times. One trader made $1.5 million in the first half-hour after the Sept. 11, 2001 terrorist attacks and another socked away a $20 million windfall from Hurricane Katrina.

What sets "The Zeroes" apart from other recent Wall Street books is that Lane actually participated in the madness. Lane, like so many others, had embarked on a spending binge, focusing on growth at all costs.

By the end of the decade, Lane had lost $530,000 of his (and his mother's) money. Creditors circled him like vultures -- and on Feb. 2, 2009, he closed Doubledown. "I wasn't the rich guy, as you know, I was the media guy," he says. Investors had poured in more than $15 million into Doubledown.

"When we pulled the plug, it was directly because our credit line got pulled and I had no cash left to cover any difference," Lane points out. "No money for payroll means game over. It wasn't just running up debts. The trouble in early 2009 was that no one was paying their bills -- all we had were IOUs. The 'credit crunch' wasn't journalist theory for me -- it was firsthand nightmare"

Lane looks back on the bad old days and remembers it all.

"I put in all of my money," Lane said. "I lost my shirt. When we had a decision to make the rent or make payroll, I made payroll."

At its peak, Doubledown was valued at about $25 million. Lane shrugged. "I had no doubt (Doubledown) had value and that it was worth a lot -- until it was worth nothing."

Lane describes everything from shooting craps with John McCain at a magazine conference to trying to deal with John Travolta, who refused to appear on the cover of Private Air because he didn't like the way his hair looked.

"The entire world had become a casino," Lane told me when we talked about it last week over lunch. "I got shellacked. I felt like I had gotten hit by a truck."

By the time that Doubledown went belly up in February 2009, Lane had to tell his wife -- Fortune writer Jennifer Reingold -- and his mother that he had failed. "The worst part was telling the employees," he remembered. "I did everything I could and still came up short. It was devastating. I had had my foot on the gas. I never thought we'd go out of business, but we had no chance of surviving."

Lenny Dykstra and Jim Cramer

By far, the oddest couple in modern Wall Street history have to be Jim Cramer, CNBC's
GE, +1.35%
"Mad Money" guru, and Lenny Dykstra, the baseball star- turned stock-picking whiz When Cramer gave Dykstra his stamp of approval, the player became a Player, on Wall Street. Dykstra wanted to partner with Doubledown to create a business that would involve sports stars -- and, of course, their money.

Reviewing "The Zeroes" in The Wall Street Journal, Edward Kosner wrote: "As portrayed in 'The Zeroes,' Mr. Dykstra (who piggybacked on a pro's stock tips) seems seriously demented. Among other tics, he likes to stay up for four or five days at a stretch before crashing. He freely admits to Mr. Lane that he used steroids while playing ball. Despite everything, Mr. Lane goes into business with him; it all ends in tears and surreal litigation." Read Business Insider report about the litigation.

No heroes

I had one quibble with the book: I wanted to understand how a journalist like Lane could go so crazy himself. With the Wall Street gang, it's (almost) understandable. These are people who want to make a lot of money. They see currency as a means to an end and, eventually, as some sort of skewed scoreboard to determine who has the most toys at the end of the day.

By contrast, most journalists go into their profession because they love to write and, perhaps, hope to change the world. How did Lane transform himself into One of Them?

If Hollywood makes a movie out of "The Zeroes," I could definitely see Nicolas Cage playing Lane. Sean Penn, resurrecting the character from "U-Turn" (which itself resembled a grown-up version of Jeff Spicoli from "Fast Times at Ridgemont High"), could perfectly capture Dykstra.

As Lane himself pointed out, there is one obstacle to seeing this story splashed across the big screen.

"There were," he concluded, "no heroes in the zeroes."

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